Clarifying similarities and differences between the monetary scale and the scale of utility is carried out by means of the comparison between the assumption of rigidity in the face of risk and risk aversion. This comparison enables us to scrutinize the additivity property of the price of a random gain which underlies the operational definition of probability. Such a property of coherence is not a simplifying hypothesis which could be approximately valid, but it is an exact property which is the foundation of probability theory when we define the price of a random gain on the basis of the monetary scale instead of the scale of utility. This is because the notion of certain gain which is equivalent to a random gain is based on the scale of utility of a risk-neutral individual
THE MONETARY SCALE AND THE SCALE OF UTILITY WITH RESPECT TO THE ADDITIVITY PROPERTY OF SUBJECTIVE PROBABILITY / Angelini, Pierpaolo; Maturo, Antonio. - In: JP JOURNAL OF FUNDAMENTAL AND APPLIED STATISTICS. - ISSN 2249-2291. - (2016), pp. 1-20.
THE MONETARY SCALE AND THE SCALE OF UTILITY WITH RESPECT TO THE ADDITIVITY PROPERTY OF SUBJECTIVE PROBABILITY
ANGELINI, PIERPAOLO
;
2016
Abstract
Clarifying similarities and differences between the monetary scale and the scale of utility is carried out by means of the comparison between the assumption of rigidity in the face of risk and risk aversion. This comparison enables us to scrutinize the additivity property of the price of a random gain which underlies the operational definition of probability. Such a property of coherence is not a simplifying hypothesis which could be approximately valid, but it is an exact property which is the foundation of probability theory when we define the price of a random gain on the basis of the monetary scale instead of the scale of utility. This is because the notion of certain gain which is equivalent to a random gain is based on the scale of utility of a risk-neutral individualFile | Dimensione | Formato | |
---|---|---|---|
1 - (1-20) - 310071601-JPFAS01 - Pierpaolo Angelini.pdf
accesso aperto
Tipologia:
Documento in Post-print (versione successiva alla peer review e accettata per la pubblicazione)
Licenza:
Creative commons
Dimensione
151.98 kB
Formato
Adobe PDF
|
151.98 kB | Adobe PDF |
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.